Should You Invest in the iShares Biotechnology ETF (IBB)?

Looking for broad exposure to the Healthcare - Biotech segment of the equity market? You should consider the iShares Biotechnology ETF (IBB), a passively managed exchange traded fund launched on 02/05/2001.

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Healthcare - Biotech is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 4, placing it in top 25%.

Index Details

The fund is sponsored by Blackrock. It has amassed assets over $5.31 billion, making it one of the largest ETFs attempting to match the performance of the Healthcare - Biotech segment of the equity market. IBB seeks to match the performance of the Nasdaq Biotechnology Index before fees and expenses.

The ICE Biotechnology Index contains securities of NASDAQ listed companies that are classified as either biotechnology or pharmaceuticals.

Costs

When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.45%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 0.33%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Healthcare sector--about 100% of the portfolio.

Looking at individual holdings, Gilead Sciences Inc (GILD) accounts for about 10.49% of total assets, followed by Amgen Inc (AMGN) and Vertex Pharmaceuticals Inc (VRTX).

The top 10 holdings account for about 51.83% of total assets under management.

Performance and Risk

The ETF has lost about -11.29% so far this year and is down about -10.70% in the last one year (as of 04/07/2025). In that past 52-week period, it has traded between $117.16 and $149.47.

The ETF has a beta of 0.82 and standard deviation of 20.93% for the trailing three-year period, making it a high risk choice in the space. With about 266 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares Biotechnology ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, IBB is a good option for those seeking exposure to the Health Care ETFs area of the market. Investors might also want to consider some other ETF options in the space.

First Trust NYSE Arca Biotechnology ETF (FBT) tracks NYSE Arca Biotechnology Index and the SPDR S&P Biotech ETF (XBI) tracks S&P Biotechnology Select Industry Index. First Trust NYSE Arca Biotechnology ETF has $1.01 billion in assets, SPDR S&P Biotech ETF has $4.52 billion. FBT has an expense ratio of 0.56% and XBI charges 0.35%.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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This article originally published on Zacks Investment Research (zacks.com).

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